California home sellers enjoyed head-turning dollar gains and profit margins again during the second quarter, the latest evidence that the highest mortgage rates in almost four decades are having little effect on prices.
With a critical shortage of homes available and just enough buyers to generate fairly strong demand, the median home price increased 5.3% during the second quarter compared to a year ago, based on an aggregate of eight markets in California.
Six of the eight housing markets in the state had home price gains, with 13% and 11% increases in San Jose and Los Angeles, respectively. Only Bakersfield and Fresno – the most affordable of the eight markets surveyed – had slight drops in home prices from a year ago.
The price gains, though modest compared to the frenzy of a few years ago, generated an average 76% profit margin for sellers statewide, according to ATTOM Data. The average dollar-in-pocket was almost $366,000 for sellers in California.
SAN JOSE-AREA HOME SELLERS DOUBLED THEIR INVESTMENT
California home sellers’ price gains and profit margins easily exceeded the nationwide averages of $130,000 and 56%, according to ATTOM Data.
All eight regions bested the national figure, including a 110% profit margin in San Jose, where the average home seller enjoyed a $836,500 payday.
San Francisco had the second-highest profit margin in the state at 84%, followed by San Diego (78%) and Fresno (73%). The Sacramento region, which had fast-rising home prices during the peak of the pandemic but has slowed the past year, was the lowest at 62%.
Now, profit margins were down in five of eight markets in the state compared to a year ago, including a 9.5% drop in Bakersfield (Kern County). But a 1.6% decline for the combined eight regions in the state is almost insignificant, especially since when homes are bought and later sold has a huge impact on the results.
BUY AND HOLD – AND GOOD TIMING
The dollar gains and profit margin are based on when homes are bought – and the purchase price – and when those homes are sold.
In California, the average owner holds their home for almost 11 years, one of the longest ownership rates in the U.S. For example, the median home sales price was $250,000 in the Sacramento region in second-quarter 2013, and has more than doubled since. San Jose and Los Angeles home prices were $675,000 and $450,000 in 2013, respectively.
California was a bit of an outlier compared to a modest second-quarter performance nationwide.
“The second-quarter profit report offers a mixed bag of pluses and minuses that added up to an overall picture of not much change for sellers,” says Rob Barber, CEO of ATTOM. “Prices jumped back upward, which was great news for owners. So did raw profits. Profit margins also remained historically elevated. But the bottom-line profit-margin trend didn’t move much at all because soaring prices are far from a new thing. Even greater price improvements will be needed to kick margins up over the rest of the year.”
Home seller price gains and profit margins gains in Q2 2024
| Metro | Q1 profit from sale | % profit change vs. Q2 ’23 | % profit on investment |
|---|---|---|---|
| Bakersfield | $140,000 | -9.5% | +67% |
| Fresno | $168,000 | -3.6% | +73% |
| Los Angeles | $375,500 | +1.8% | +64% |
| Riverside | $240,000 | -2.6% | +72% |
| Sacramento | $220,000 | -2.9% | +62% |
| San Diego | $400,000 | -0.3% | +78% |
| San Francisco | $547,000 | +0.3% | +83.6% |
| San Jose | $836,500 | +3.9% | +110% |
Source: ATTOM Data
